Public-sector information technology

The trouble with EDS

How the government fell out with its main IT supplier

“NO PUBLIC sector can be comfortable having one dominant supplier,” Sir Peter Gershon told a House of Commons committee last winter. Sir Peter, who oversees government procurement, should be a happier man now: the supplier he had in mind was Electronic Data Systems (EDS), an American company which a year ago held half the government IT contracts in Britain. Today it is busy handing over the biggest of them, with the Inland Revenue, to a successor.

EDS has had a grim year here. As any supplier to a big supermarket could have told it, having one dominant customer can also be uncomfortable. Two-thirds of its British business was public-sector, and the Revenue contract was one-fifth of that. Suddenly last spring, nine years into a ten-year, £3 billion-odd contract, the relationship went sour. A new tax credit was to come into force; EDS had set up the system to handle it; the taxmen drastically shortened the running-in period; and the result was chaos. In December, with a new ten-year contract up for grabs, the Revenue switched to Paris-based Capgemini.

Meanwhile, an unhappy saga at the Child Support Agency was dragging on. The EDS system to handle maintenance payments there was already long overdue when it came into operation in early 2003. It isn't working properly yet, and the government has been withholding about 15% of the monthly fee. EDS may not in fact deserve all the ministerial chuntering and media barbs that it has had: family discord and divorce seldom lead to the reliable information that systems chew on. But bad luck on EDS: fairly or unfairly, this was another bad mark against its name.

Little wonder, then, that when the National Health Service last summer was considering suppliers for the revolution it plans in its IT over the next few years, EDS did not even make the shortlists. Worse, in March the NHS cancelled a contract with EDS for an e-mail and directory system that was supposed to link all its doctors and employees but to which few of them had yet switched.

Is there something about EDS that has made so much go wrong? Not according to people in the industry. EDS has had so many failures with government largely because it had so many contracts. Government IT is a notoriously difficult business.

EDS has also had successes, which have been less visible than its failures. Despite the recent break-up, it had had a fairly happy relationship with the Inland Revenue for nine years—indeed it relied too much on that to win the new contract, admits Sheelagh Whittaker, who heads the company's public-sector business in Britain. And it is still managing other contracts—ones that are not much written about, like the almost trouble-free installation of London Underground's Oyster electronic card-payment system, or the nationwide roll-out of the Post Office's new simplified bank account.

Nor does EDS's ouster as the government's main IT partner guarantee that the long history of public-sector IT trouble ends now. It has involved many reputable companies and many government services: passports, the probation service, asylum-seekers, magistrates courts, criminal records, bits of the NHS, and more. The public sector has learned lessons, say industry sources, above all the need for firm leadership, on both sides, in handling big contracts. But Capgemini and the Inland Revenue have still to bed down together. And the NHS's huge IT programme—£6 billion of it, two big national contracts and five regional ones, all to be seamlessly integrated—will test the public sector's new sophistication to the full.